1
EXHIBIT 13
SELECTED FINANCIAL DATA
YEAR ENDED DECEMBER 31,
In thousands, except per share data 2000 1999 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------
Net sales* $8,369,857 $7,950,822 $6,587,576 $5,981,224 $5,697,592
Cost of goods sold* 5,764,360 5,436,056 4,468,568 4,049,104 3,878,879
Selling, administrative and other expenses* 1,958,747 1,886,699 1,529,891 1,366,520 1,273,480
Income before income taxes 646,750 628,067 589,117 565,600 545,233
Income taxes 261,427 250,445 233,323 223,203 215,157
Net income $ 385,323 $ 377,622 $ 355,794 $ 342,397 $ 330,076
Average common shares outstanding during year -
assuming dilution** 175,327 179,238 180,081 180,165 182,189
Per common share:**
Diluted net income $ 2.20 $ 2.11 $ 1.98 $ 1.90 $ 1.81
Dividends declared 1.10 1.04 1.00 .96 .89
December 31 closing stock price 26.19 24.81 33.44 33.94 29.67
Long-term debt, less current maturities 770,581 702,417 588,640 209,490 110,241
Shareholders' equity 2,260,806 2,177,517 2,053,332 1,859,468 1,732,054
Total assets $4,142,114 $3,929,672 $3,600,380 $2,754,363 $2,521,631
============================================================================================================================
* Prior years have been reclassified in connection with the 2000 adoption of
certain new accounting pronouncements.
** Adjusted to reflect the three-for-two stock split in 1997.
SELECTED RATIO ANALYSIS
YEAR ENDED DECEMBER 31,
In % of net sales 2000 1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------
Cost of goods sold* 68.87% 68.37% 67.83% 67.70% 68.08%
Selling, administrative and other expenses* 23.40 23.73 23.22 22.85 22.35
Income before income taxes 7.73 7.90 8.94 9.46 9.57
Net income 4.60 4.75 5.40 5.72 5.79
Rate earned on shareholders' equity
at the beginning of each year 17.70% 18.39% 19.13% 19.77% 19.99%
==============================================================================================================================
* Prior years have been reclassified in connection with the 2000 adoption of
certain new accounting pronouncements.
MARKET AND DIVIDEND INFORMATION
High and Low Sales Price and Dividends per Share of Common Shares Traded on the
New York Stock Exchange.
SALES PRICE OF COMMON SHARES
Quarter 2000 1999
- ----------------------------------------------------------------------------------------
High Low High Low
First $25.56 $19.94 $33.81 $27.81
Second 26.69 20.00 35.25 28.06
Third 22.19 18.25 35.75 25.25
Fourth 26.44 18.63 27.50 22.25
DIVIDENDS DECLARED PER SHARE
2000 1999
- ----------------------------------------------------------------------------------
First $.275 $.26
Second .275 .26
Third .275 .26
Fourth .275 .26
Number of Record Holders of Common Stock: 8,102
16
2
SEGMENT DATA
YEAR ENDED DECEMBER 31,
Dollars in thousands 2000 1999 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------------
Net sales:
Automotive $ 4,163,814 $ 4,084,775 $ 3,262,406 $ 3,071,153 $ 3,008,105
Industrial 2,342,686 2,156,134 2,008,789 1,853,270 1,677,859
Office products 1,336,500 1,218,367 1,122,420 1,080,822 1,034,510
Electrical/electronic materials 557,866 522,411 220,417 -- --
Other (31,009) (30,865) (26,456) (24,021) (22,882)
- -------------------------------------------------------------------------------------------------------------------------
Total net sales $ 8,369,857 $ 7,950,822 $ 6,587,576 $ 5,981,224 $ 5,697,592
=========================================================================================================================
Operating profit:
Automotive $ 381,250 $ 383,830 $ 330,988 $ 315,303 $ 311,816
Industrial 206,193 186,203 176,456 166,367 151,129
Office products 134,343 118,345 113,821 110,793 103,439
Electrical/electronic materials 28,010 23,343 12,030 -- --
- -------------------------------------------------------------------------------------------------------------------------
Total operating profit 749,796 711,721 633,295 592,463 566,384
Interest expense (63,496) (41,487) (20,096) (13,365) (8,498)
Corporate expense (23,277) (22,283) (19,545) (17,058) (17,917)
Equity in (loss) income from investees -- (3,675) 3,329 6,730 9,398
Goodwill amortization (13,843) (12,708) (5,157) (1,624) (1,548)
Minority interests (2,430) (3,501) (2,709) (1,546) (2,586)
- -------------------------------------------------------------------------------------------------------------------------
Income before income taxes $ 646,750 $ 628,067 $ 589,117 $ 565,600 $ 545,233
=========================================================================================================================
Assets:
Automotive $ 2,099,610 $ 2,034,417 $ 1,966,774 $ 1,623,644 $ 1,478,023
Industrial 840,585 758,206 671,454 584,356 524,998
Office products 542,406 503,904 442,220 380,804 376,616
Electrical/electronic materials 190,635 174,258 147,074 -- --
Corporate 17,443 18,588 18,385 18,611 15,662
Goodwill and equity investments 451,435 440,299 354,473 146,948 126,332
- -------------------------------------------------------------------------------------------------------------------------
Total assets $ 4,142,114 $ 3,929,672 $ 3,600,380 $ 2,754,363 $ 2,521,631
=========================================================================================================================
Depreciation and amortization:
Automotive $ 51,546 $ 51,563 $ 43,637 $ 40,675 $ 34,265
Industrial 11,617 10,926 8,619 6,688 5,860
Office products 9,598 8,814 8,391 7,865 7,437
Electrical/electronic materials 4,391 4,173 1,508 -- --
Corporate 1,308 1,783 1,993 2,015 1,335
Goodwill 13,843 12,708 5,157 1,624 1,548
- -------------------------------------------------------------------------------------------------------------------------
Total depreciation and amortization $ 92,303 $ 89,967 $ 69,305 $ 58,867 $ 50,445
=========================================================================================================================
Capital expenditures:
Automotive $ 35,031 $ 57,710 $ 69,154 $ 68,305 $ 80,682
Industrial 20,054 11,275 6,972 13,451 7,330
Office products 9,116 16,085 6,901 6,069 5,652
Electrical/electronic materials 3,183 3,113 4,688 -- --
Corporate 3,745 100 546 2,600 1,494
- -------------------------------------------------------------------------------------------------------------------------
Total capital expenditures $ 71,129 $ 88,283 $ 88,261 $ 90,425 $ 95,158
=========================================================================================================================
Net sales:
United States $ 7,665,498 $ 7,345,707 $ 6,535,020 $ 5,977,012 $ 5,697,053
Canada 633,715 585,504 79,012 28,233 23,421
Mexico 101,653 50,476 -- -- --
Other (31,009) (30,865) (26,456) (24,021) (22,882)
- -------------------------------------------------------------------------------------------------------------------------
Total net sales $ 8,369,857 $ 7,950,822 $ 6,587,576 $ 5,981,224 $ 5,697,592
=========================================================================================================================
Net long-lived assets:
United States $ 618,818 $ 620,837 $ 545,452 $ 412,344 $ 366,119
Canada 201,895 207,672 187,951 6,495 6,725
Mexico 25,982 25,333 15,338 15,767 16,196
- -------------------------------------------------------------------------------------------------------------------------
Total net long-lived assets $ 846,695 $ 853,842 $ 748,741 $ 434,606 $ 389,040
=========================================================================================================================
17
3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DECEMBER 31, 2000
RESULTS OF OPERATIONS:
Net sales in 2000 increased for the 51st consecutive year to a record high
of $8.37 billion. This was an increase of 5% over the prior year amount of
$7.95 billion and compares with increases of 21% in 1999, and 10% in 1998.
Excluding the effect of acquisitions, sales would have increased
approximately 7% in 1999. Sales for the Automotive Parts Group increased 2%
in 2000 versus 25% (5% excluding acquisitions) in 1999 and 6% in 1998. Price
increases for the Automotive Parts Group were 1% in 2000 and flat in 1999
and 1998. Sales for the Industrial Parts Group increased 9% in 2000 versus
7% in 1999 and 8% in 1998, reflecting geographic expansion through new
branches and acquisitions and increased market share due to expanded product
offerings and new markets. Price increases for the Industrial Parts Group
were approximately 2% in 2000 and 1% in 1999 and 1998. Sales for the Office
Products Group increased 10% in 2000, 9% in 1999 and 4% in 1998, reflecting
additional market share, increased merchandising and marketing efforts and
new product offerings. Price increases for the Office Products Group were
approximately 1.7% in 2000 and less than 1% in 1999 and 1998. Sales for the
Electrical/Electronic Group, which was acquired July 1, 1998, were up 7% for
2000 reflecting new product programs and expanded customer base. Price
increases for the Electrical/Electronics Group were 1% in 2000 and less than
1% in 1999 and 1998.
Costs of goods sold was 68.9% of net sales in 2000 compared to 68.4% in 1999
and to 67.8% in 1998. Selling, administrative and other expenses increased
4% in 2000 to $1.96 billion versus a 23% increase in 1999 (8% increase,
excluding 1999 acquisitions) and was 23.4% of net sales in 2000, 23.7% of
net sales in 1999, and 23.2% of net sales in 1998. Selling, administrative
and other expenses decreased as a percentage of sales in 2000 due to
improved operating efficiencies from integration of acquisitions and branch
consolidations, as well as improved operating systems. Selling,
administrative and other expenses increased as a percentage of sales in 1999
as a result of additional acquisition costs including interest expense,
goodwill amortization and salaries and benefits plus increased information
system expenses due to e-commerce initiatives. The effective income tax rate
was 40.4% in 2000 as compared to 39.9% in 1999 and 39.6% in 1998. The
increase in the tax rate in 2000 and 1999 primarily related to increased
non-deductible goodwill amortization and the effect of international
operations. Net income as a percent of net sales was 4.6% in 2000, 4.7% in
1999, and 5.4% in 1998. Net income in 2000 increased to $385.3 million,
reflecting a 2% increase over 1999 net income of $377.6 million. Net income
in 1999 increased 6% over 1998 net income of $355.8 million. Diluted
earnings per share were $2.20 in 2000 compared to $2.11 in 1999 for an
increase of 4.3%.
LIQUIDITY AND SOURCES OF CAPITAL:
The ratio of current assets to current liabilities was 3.1 to 1 at the close
of 2000 with current assets amounting to 73% of total assets. Trade accounts
receivable and inventories increased 2% and 5% respectively, while working
capital increased 3%. The increase in working capital has been financed
principally from the Company's cash flow generated by operations.
At December 31, 2000, the Company had the following unsecured revolving
lines of credit: $200 million, LIBOR plus .55%, due 2003, $175 million
outstanding; $200 million, LIBOR plus .55%, due 2002, $119 million
outstanding; and $100 million, banker's acceptance rate, due 2001, $98
million outstanding. In
EARNINGS PER SHARE*
IN DOLLARS
[GRAPH]
*Restated to reflect stock splits
DIVIDENDS PER SHARE*
IN DOLLARS
[GRAPH]
*Restated to reflect stock splits
18
4
addition, the Company had the following unsecured term notes:$50 million, LIBOR
plus .25%, due 2001; $50 million, 5.98%, due 2002; $50 million, LIBOR plus .25%,
due 2005; $50 million, LIBOR plus .25%, due 2008; $231 million, LIBOR plus .55%,
due 2003; and $44 million in other borrowings. Certain borrowings due in 2001
are classified as non-current in the Company's December 31, 2000 balance sheet
as the Company has available committed sources of long-term financing. In
addition, the weighted average interest rate on the Company's outstanding
borrowings was approximately 6.7% and 6.3% at December 31, 2000 and 1999,
respectively. Total interest expense for all borrowings was $63.5 million and
$41.5 million in 2000 and 1999, respectively.
In addition, the Company had the following Canadian dollar denominated
borrowings translated into U.S. dollars at December 31, 2000: a line of credit
secured by accounts receivable, $39 million, banker's acceptance rate plus .27%;
and $15 million in other borrowings.
In August 1999, the Company completed the repurchase of 15 million shares
authorized by the Board of Directors in 1994. The Board authorized the
repurchase of an additional 15 million shares on April 19, 1999. Through
December 31, 2000, approximately 7 million shares have been repurchased under
this new authorization.
Existing credit facilities, current financial resources and anticipated funds
from operations are expected to meet requirements for working capital in 2001.
Capital expenditures for 2000 amounted to $71 million and in 1999 and 1998
amounted to $88 million. The amounts reflect the Company's continuing geographic
expansion as well as the upgrading of existing facilities. It is anticipated
that capital expenditures in 2001 will be in the same range of 1998 through
2000.
The Company manages its exposure to changes in short-term interest rates,
particularly to reduce the impact on its floating-rate term notes, by entering
into interest rate swap agreements. The counterparties to these contracts are
high credit, quality commercial banks. Consequently, credit risk, which is
inherent in all swaps, has been minimized to a large extent. Interest expense is
adjusted for the differential to be paid or received as interest rates change.
The effect of such adjustments on interest expense has not been significant. The
level of floating-rate debt not fixed by swap agreements was approximately $282
million at December 31, 2000. Accordingly, a 1% adverse change in interest rates
would not have a material adverse impact on future earnings and cash flows of
the Company.
FORWARD-LOOKING STATEMENTS:
The Private Securities Litigation Reform Act of 1995 (the Act) provides a safe
harbor for forward-looking statements made by or on behalf of the Company. The
Company and its representatives may from time to time make written or verbal
forward-looking statements, including statements contained in our Company's
filings with the Securities and Exchange Commission and in our reports to
shareholders. All statements which address operating performance, events or
developments that we expect or anticipate will occur in the future, including
statements relating to revenue, market share and net income growth, or
statements expressing general optimism about future operating results, are
forward-looking statements within the meaning of the Act. The forward-looking
statements are and will be based on management's then current views and
assumptions regarding future events and operating performance. There are many
factors which could cause actual results to differ materially from those
anticipated by statements made herein. Such factors include, but are not limited
to, changes in general economic conditions, the growth rate of the market for
the Company's products and services, the ability to maintain favorable supplier
arrangements and relationships, competitive product and pricing pressures, the
effectiveness of the Company's promotional, marketing and advertising programs,
changes in laws and regulations, including changes in accounting and taxation
guidance, the uncertainties of litigation, as well as other risks and
uncertainties discussed from time to time in the Company's filings with the
Securities and Exchange Commission.
QUARTERLY RESULTS OF OPERATIONS:
Miscellaneous year-end adjustments resulted in increasing net income during the
fourth quarter of 2000 and 1999 by approximately $32.0 million ($.18 per share)
and $35.7 million ($.20 per share), respectively. Miscellaneous year-end
adjustments primarily relate to changes in management's estimates and
assumptions related to the valuation of inventory, the calculation of volume
purchasing rebates earned and other adjustments to judgmental reserves which
cannot be accurately determined until the end of the year.
The following is a summary of the quarterly results of operations for the years
ended December 31, 2000 and 1999. The quarterly financial statements have been
reclassified in connection with the Company's fourth quarter 2000 adoption of
new accounting pronouncements related to the income statement classification of
freight billed to customers and other discounts and incentives. These
reclassifications had no effect on net income.
Three Months Ended
- ------------------------------------------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31,
- ------------------------------------------------------------------------------------
2000 (in thousands except for per share data)
----
Net Sales $ 2,070,992 $ 2,129,377 $ 2,150,572 $ 2,018,916
Gross Profit 620,052 649,671 655,797 679,977
Net Income 91,729 96,593 91,729 105,272
Basic and Diluted
Net Income per
Common Share .52 .55 .53 .61
1999
Net Sales $ 1,894,941 $ 2,017,074 $ 2,073,256 $ 1,965,551
Gross Profit 579,920 620,952 633,669 680,225
Net Income 86,066 92,569 90,637 108,350
Basic and Diluted
Net Income per
Common Share .48 .52 .51 .61
19
5
REPORT OF INDEPENDENT AUDITORS
BOARD OF DIRECTORS
GENUINE PARTS COMPANY
We have audited the accompanying consolidated balance sheets of Genuine Parts
Company and subsidiaries as of December 31, 2000 and 1999, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Genuine
Parts Company and subsidiaries at December 31, 2000 and 1999, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
February 2, 2001
Atlanta, Georgia
20
6
CONSOLIDATED BALANCE SHEETS
December 31,
Dollars in thousands 2000 1999
- -------------------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 27,738 $ 45,735
Trade accounts receivable 1,031,662 1,006,663
Merchandise inventories 1,864,334 1,771,789
Prepaid expenses and other assets 95,747 71,016
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 3,019,481 2,895,203
Goodwill, less accumulated amortization (2000--$37,680; 1999--$25,286) 451,435 440,299
Other assets 275,938 180,627
PROPERTY, PLANT AND EQUIPMENT:
Land 40,790 40,912
Buildings, less allowance for depreciation (2000--$96,714; 1999--$90,305) 136,416 138,012
Machinery and equipment, less allowance for depreciation
(2000--$340,228; 1999--$312,716) 218,054 234,619
- -------------------------------------------------------------------------------------------------------------------------------
NET PROPERTY, PLANT AND EQUIPMENT 395,260 413,543
- -------------------------------------------------------------------------------------------------------------------------------
$ 4,142,114 $ 3,929,672
===============================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $ 635,499 $ 581,010
Current portion of long-term debt and other borrowings 151,452 133,056
Accrued compensation 58,661 69,956
Other accrued expenses 58,164 58,603
Dividends payable 47,494 45,355
Income taxes payable 37,043 28,032
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 988,313 916,012
LONG-TERM DEBT 770,581 702,417
DEFERRED INCOME TAXES 77,814 87,466
MINORITY INTERESTS IN SUBSIDIARIES 44,600 46,260
SHAREHOLDERS' EQUITY:
Preferred Stock, par value $1 per share--authorized
10,000,000 shares; none issued -- --
Common Stock, par value $1 per share--authorized
450,000,000 shares; issued 172,389,688 shares
in 2000 and 177,275,602 shares in 1999 172,390 177,276
Accumulated other comprehensive income (13,041) (6,857)
Retained earnings 2,101,457 2,007,098
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 2,260,806 2,177,517
- -------------------------------------------------------------------------------------------------------------------------------
$ 4,142,114 $ 3,929,672
===============================================================================================================================
See accompanying notes.
21
7
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
In thousands, except per share data 2000 1999 1998
- --------------------------------------------------------------------------------------------------------------------
Net sales $8,369,857 $7,950,822 $6,587,576
Cost of goods sold 5,764,360 5,436,056 4,468,568
- --------------------------------------------------------------------------------------------------------------------
2,605,497 2,514,766 2,119,008
Selling, administrative and other expenses 1,958,747 1,886,699 1,529,891
- --------------------------------------------------------------------------------------------------------------------
Income before income taxes 646,750 628,067 589,117
Income taxes 261,427 250,445 233,323
- --------------------------------------------------------------------------------------------------------------------
NET INCOME $ 385,323 $ 377,622 $ 355,794
====================================================================================================================
Basic and diluted net income per common share $ 2.20 $ 2.11 $ 1.98
====================================================================================================================
Average common shares outstanding 175,009 178,746 179,416
Dilutive effect of stock options and non-vested restricted stock awards 318 492 665
- --------------------------------------------------------------------------------------------------------------------
Average common shares outstanding--assuming dilution 175,327 179,238 180,081
====================================================================================================================
See accompanying notes.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Accumulated
Common Stock Additional Other Total
---------------------- Paid-In Comprehensive Retained Shareholders'
Dollars in thousands Shares Amount Capital Income Earnings Equity
- --------------------------------------------------------------------------------------------------------------------------------
Balance at January 1, 1998 178,947,976 $ 178,948 $ -- $ -- $ 1,680,520 $ 1,859,468
Net income -- -- -- -- 355,794 355,794
Foreign currency translation
adjustment -- -- -- (3,110) -- (3,110)
-----------
Comprehensive income 352,684
-----------
Cash dividends declared -- -- -- -- (179,366) (179,366)
Stock options exercised,
including tax benefit 284,153 284 5,465 -- -- 5,749
Purchase of stock (2,311,580) (2,312) (74,023) -- -- (76,335)
Stock issued in connection with
acquisitions 2,584,602 2,585 88,547 -- -- 91,132
- --------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 179,505,151 179,505 19,989 (3,110) 1,856,948 2,053,332
Net income -- -- -- -- 377,622 377,622
Foreign currency translation
adjustment -- -- -- (3,747) -- (3,747)
-----------
Comprehensive income 373,875
-----------
Cash dividends declared -- -- -- -- (185,870) (185,870)
Stock options exercised,
including tax benefit 322,003 322 6,168 -- -- 6,490
Purchase of stock (3,863,353) (3,863) (65,663) -- (41,602) (111,128)
Stock issued in connection
with acquisitions 1,311,801 1,312 37,772 -- -- 39,084
Other -- -- 1,734 -- -- 1,734
- --------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 177,275,602 177,276 -- (6,857) 2,007,098 2,177,517
Net income -- -- -- -- 385,323 385,323
Foreign currency translation
adjustment -- -- -- (6,184) -- (6,184)
-----------
Comprehensive income 379,139
-----------
Cash dividends declared -- -- -- -- (192,455) (192,455)
Stock options exercised,
including tax benefit 386 -- 8 -- -- 8
Purchase of stock (5,466,029) (5,466) (13,840) -- (98,509) (117,815)
Stock issued in connection
with acquisitions 579,729 580 13,832 -- -- 14,412
- --------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000 172,389,688 $ 172,390 $ -- $(13,041) $ 2,101,457 $ 2,260,806
================================================================================================================================
See accompanying notes.
22
8
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
Dollars in thousands 2000 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 385,323 $ 377,622 $ 355,794
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 92,303 89,967 69,305
Gain on sale of property, plant and equipment (5,674) (4,595) (1,664)
Deferred income taxes (6,714) 12,347 10,379
Income applicable to minority interests 2,430 3,501 2,709
Changes in operating assets and liabilities:
Trade accounts receivable (14,298) (42,846) (74,165)
Merchandise inventories (84,508) (28,671) (107,290)
Trade accounts payable 50,899 12,104 14,158
Other, net (105,336) (51,662) 24,052
- ----------------------------------------------------------------------------------------------------------------------------------
(70,898) (9,855) (62,516)
- ----------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 314,425 367,767 293,278
INVESTING ACTIVITIES
Purchases of property, plant and equipment (71,129) (88,283) (88,261)
Proceeds from sale of property, plant and equipment 10,605 10,254 67,522
Acquisition of businesses and other investments, net of cash acquired (46,226) (89,272) (310,911)
- ----------------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (106,750) (167,301) (331,650)
FINANCING ACTIVITIES
Proceeds from credit facilities 2,813,820 2,579,675 1,173,359
Payments on credit facilities (2,731,601) (2,530,429) (874,175)
Stock options exercised 8 6,490 5,749
Dividends paid (189,995) (184,247) (178,027)
Purchase of stock (117,815) (111,128) (76,335)
- ----------------------------------------------------------------------------------------------------------------------------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (225,583) (239,639) 50,571
EFFECT OF EXCHANGE RATE CHANGES ON CASH (89) (64) (50)
- ----------------------------------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (17,997) (39,237) 12,149
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 45,735 84,972 72,823
- ----------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 27,738 $ 45,735 $ 84,972
=================================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
CASH PAID DURING THE YEAR FOR:
Income taxes $ 252,416 $ 244,250 $ 200,280
=================================================================================================================================
Interest $ 61,750 $ 39,888 $ 18,867
=================================================================================================================================
See accompanying notes.
23
9
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS DECEMBER 31, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Genuine Parts
Company and all of its subsidiaries (the "Company"). Income applicable to
minority interests is included in other expenses. Significant intercompany
accounts and transactions have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the consolidated financial statements and accompanying notes. Actual results may
differ from those estimates.
FOREIGN CURRENCY TRANSLATION
The balance sheets and statements of income of the Company's foreign
subsidiaries have been translated into U.S. dollars at the current and average
exchange rates, respectively. The foreign currency translation adjustment is
included as a component of accumulated other comprehensive income, net of income
taxes.
CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of three
months or less when purchased to be cash equivalents.
OTHER ASSETS
Other assets consist primarily of a prepaid pension asset, certain internal-use
information systems projects in progress, and an investment accounted for under
the cost method.
MERCHANDISE INVENTORIES
Merchandise inventories are valued at the lower of cost or market. Cost is
determined by the last-in, first-out (LIFO) method for a majority of automotive
parts, electrical/electronic materials, and industrial parts, and by the
first-in, first-out (FIFO) method for office products and certain other
inventories. If the FIFO method had been used for all inventories, cost would
have been $155,831,000 and $141,041,000 higher than reported at December 31,
2000 and December 31, 1999, respectively.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated on the basis of cost. Depreciation is
determined principally on a straight-line basis over the estimated useful life
of each asset.
GOODWILL
Goodwill, which represents the excess of the purchase price paid over the fair
value of the net assets acquired in connection with business acquisitions, is
amortized over a period of 40 years.
LONG-LIVED ASSETS
Long-lived assets, including goodwill, are periodically reviewed for impairment
based on an assessment of future operations. The Company records impairment
losses on long-lived assets used in operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount.
REVENUE RECOGNITION
The Company recognizes revenues from product sales upon shipment to its
customers.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount reflected in the consolidated balance sheets for cash, cash
equivalents, accounts receivable, long-term debt and other borrowings
approximate their respective fair values. Fair values are based primarily on
quoted prices for those or similar instruments.
SHIPPING AND HANDLING COSTS
Shipping and handling costs are classified as selling, general and
administrative expenses in the accompanying consolidated statements of income
and totaled approximately $200,000,000, $180,000,000 and $148,000,000 in the
years ended December 31, 2000, 1999, and 1998, respectively.
NET INCOME PER COMMON SHARE
Basic net income per common share is computed by dividing net income by the
weighted average number of common shares outstanding during the year. The
computation of diluted net income per common share includes the dilutive effect
of stock options and non-vested restricted stock awards. Options to purchase
4,325,000, 4,265,000, and 1,790,000 shares of common stock at prices ranging
from $23 to $35 per share were outstanding at December 31, 2000, 1999 and 1998,
respectively, but were not included in the computation of diluted net income per
common share because the options' exercise price was greater than the average
market price of the common shares. The dilutive effect of options to purchase
748,312 shares of common stock at an average exercise price of approximately $7
per share issued in connection with a July 1, 1998 acquisition have been
included in the computation of diluted net income per common share since the
date of the acquisition.
24
10
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for
Derivative Instruments and Hedging Activities". This statement requires the fair
value of derivatives to be recorded as assets or liabilities. Gains or losses
resulting from changes in the fair values of derivatives would be accounted for
currently in earnings or comprehensive income depending on the purpose of the
derivatives and whether they qualify for hedge accounting treatment.
The adoption of SFAS 133 will result in a $6,226,000 charge to other
comprehensive income, net of tax, from a cumulative effect of a change in
accounting principle, and a corresponding decrease in shareholders' equity in
the Company's financial statements as of January 1, 2001.
In 2000, the Emerging Issues Task Force of the FASB reached a consensus on Issue
00-10, "Accounting for Shipping and Handling Costs" and Issue 00-14 "Accounting
for Certain Sales Incentives", (collectively, "the Issues"). The Company adopted
the Issues in the fourth quarter of 2000 and prior year financial statements
have been reclassified to conform to the requirements of the Issues. There was
no effect on net income as a result of the adoption of the Issues. The net
effect of the adoption of the Issues was a reduction in net sales of
$31,009,000, $30,865,000, and $26,456,000; a decrease in cost of sales of
$159,418,000, $151,501,000, and $142,957,000; and an increase in selling,
general, and administrative expenses of $128,409,000, $120,636,000, and
$116,501,000 in the years ended December 31, 2000, 1999, and 1998, respectively.
2. ACQUISITIONS
Acquisitions have been accounted for under the purchase method of accounting.
Goodwill, representing the excess of the purchase price over the fair value of
the net assets acquired, totaled approximately $23,226,000, $108,300,000 and
$287,799,000 for the 2000, 1999 and 1998 acquisitions, respectively. All
acquired businesses are included in the Company's consolidated statements of
income from the dates of acquisition.
On July 1, 1998, the Company acquired EIS, Inc. and subsidiaries ("EIS"), a
distributor of electrical/electronic materials for a combination of cash and
stock valued at approximately $180,000,000, which includes certain non-compete
agreements. On December 1, 1998, the Company acquired the remaining outstanding
shares of UAP Inc., a Montreal, Canada-based automotive parts distributor, for
cash totaling approximately $231,000,000.
3. CREDIT FACILITIES
Amounts outstanding under the Company's credit facilities consist of the
following:
December 31
In Thousands 2000 1999
- --------------------------------------------------------------------------------------
U.S. DOLLAR DENOMINATED BORROWINGS:
Unsecured revolving line of credit,
$200,000,000, Libor plus .55%,
due December 2003 $175,000 $200,000
Unsecured 364 day line of credit,
$200,000,000, Libor plus .55%,
due January 2002 119,000 16,800
Unsecured revolving line of credit,
$100,000,000, Banker's Acceptance
rate, due February 2001 98,249 49,464
Unsecured term notes:
December 27, 1996, Libor plus
.25%, due December 2001 50,000 50,000
October 31, 1997, 5.98% fixed
until October 2001, then the
higher of 5.98% or Libor plus
.25%, due October 2002 50,000 50,000
July 1, 1998, Libor plus .25%,
due July 2005 50,000 50,000
October 1, 1998, Libor plus .25%,
due October 2008 50,000 50,000
December 1, 1998, Libor plus .55%,
due December 2003 231,367 231,367
Other borrowings 43,742 71,858
CANADIAN DOLLAR DENOMINATED
BORROWINGS TRANSLATED INTO
U.S. DOLLARS:
Unsecured revolving lines of credit,
CND$25,000,000, Banker's
Acceptance rate plus .55%,
due October 2002 8,540 --
Unsecured revolving lines of credit,
CND$100,000,000, Banker's
Acceptance rate plus .55%,
due January 2004 6,770 22,144
Line of credit, CND$65,000,000,
secured by accounts receivable,
Banker's Acceptance rate plus .27%,
cancelable on 30 days notice or due
March 2003 39,365 41,544
Other borrowings -- 2,296
- --------------------------------------------------------------------------------------
922,033 835,473
Current portion of long-term debt
and other borrowings 151,452 133,056
- --------------------------------------------------------------------------------------
$770,581 $702,417
======================================================================================
25
11
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS, CONTINUED
Under the unsecured revolving line of credit due in February 2001, approximately
$49,000,000 has been classified as long-term as the Company has the current
intent and available lines of credit to refinance these amounts on a long-term
basis.
The principal amount of the Company's borrowings subject to variable rates
totaled approximately $758,463,000 and $674,602,000 at December 31, 2000 and
1999, respectively. The weighted average interest rate on the Company's
outstanding borrowings was approximately 6.70% and 6.28% at December 31, 2000
and 1999, respectively.
The Company enters into interest rate swap agreements to manage interest rate
risk, thereby reducing exposure to future interest rate movements. Under
interest rate swap agreements, the parties agree to exchange, at specific
intervals, the difference between the fixed rate and floating rate interest
amounts calculated by reference to an agreed notional amount. At December 31,
2000, the Company was committed to receive an average variable rate of 6.33% and
pay an average fixed rate of 6.79% on notional amounts of $476,688,000. The
Company's notional amounts of interest rate swaps expire as follows: $6,672,000
in 2001, $50,000,000 in 2002, $320,016,000 in 2003, $50,000,000 in 2005 and
$50,000,000 in 2008. The fair value of the liability for all such interest rate
swap agreements was approximately $9,579,000 at December 31, 2000.
The Company guaranteed borrowings of affiliates totaling approximately
$49,738,000 and $62,400,000 at December 31, 2000 and 1999, respectively.
The $231,367,000 term note contains one restrictive covenant, whereby the
Company must maintain a debt to equity ratio not greater than 50%. Total
interest expense for all borrowings was $63,496,000 in 2000, $41,487,000 in 1999
and $20,096,000 in 1998.
Approximate maturities under the Company's credit facilities are as follows (in
thousands):
2001 $151,452
2002 245,685
2003 411,224
2004 7,009
2005 55,185
Subsequent to 2005 51,478
------------------------------------
$922,033
====================================
4. SHAREHOLDERS' EQUITY
The Company has a Shareholder Protection Rights Agreement which includes the
distribution of rights to common shareholders under certain defined
circumstances. The rights entitle the holder, upon occurrence of certain events,
to purchase additional stock of the Company. The rights will be exercisable only
if a person, group or company acquires 20% or more of the Company's common stock
or commences a tender offer that would result in ownership of 20% or more of the
common stock. The Company is entitled to redeem each right for one cent.
5. LEASED PROPERTIES
The Company leases land, buildings and equipment. Certain land and building
leases have renewal options generally for periods ranging from two to ten years.
Future minimum payments, by year and in the aggregate, under the noncancellable
operating leases with initial or remaining terms of one year or more consisted
of the following at December 31, 2000 (in thousands):
2001 $ 87,268
2002 68,583
2003 48,648
2004 34,964
2005 25,000
Subsequent to 2005 84,050
----------------------------------
$348,513
==================================
Rental expense for operating leases was $98,689,000 in 2000, $100,546,000 in
1999, and $76,834,000 in 1998.
6. STOCK OPTIONS AND RESTRICTED STOCK AWARDS
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No. 123, "Accounting for Stock-Based Compensation," ("SFAS 123"),
requires use of option valuation models that were not developed for use in
valuing employee stock options. Under APB 25, no compensation expense is
recognized if the exercise price of the Company's employee stock options equals
the market price of the underlying stock on the date of grant.
In 1999, the Company authorized the grant of options of up to 9,000,000 shares
of common stock. In accordance with stock option plans approved by shareholders,
options are granted to key personnel for the purchase of the Company's stock at
prices not less than the fair market value of the shares on the dates of grant.
Most options may be exercised not earlier than twelve months nor later than ten
years from the date of grant.
Pro forma information regarding net income and earnings per share is required by
SFAS 123 determined as if the Company had accounted for its employee stock
options granted subsequent to December 31, 1994 under the fair value method of
that Statement. The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for 2000 and 1999, respectively: risk-free interest
rates of 5.9% and 5.5%; dividend yield of 5.0% and 3.5%; volatility factor of
the expected market price of the Company's common stock
26
12
of .06 and .07, and an expected life of the option of 6 years and 7 years. No
options were granted during 1998.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows (in thousands except per share amounts):
2000 1999 1998
- --------------------------------------------------------------------------------------------------------
Pro forma net income $ 384,015 $ 374,801 $ 351,875
Pro forma basic net income
per common share $ 2.19 $ 2.10 $ 1.96
Pro forma diluted net
income per common share $ 2.19 $ 2.09 $ 1.95
A summary of the Company's stock option activity and related information are as
follows:
2000 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Shares Exercise Shares Exercise Shares Exercise
(000's) Price (000's) Price (000's) Price
- ----------------------------------------------------------------------------------------------------------------------------------
Outstanding at beginning of year 5,388 $ 28 3,827 $26 3,588 $29
Granted 2,412 21 2,046 32 -- --
Issued in connection with acquisitions -- -- -- -- 748 7
Exercised (8) 22 (430) 23 (413) 24
Forfeited (279) 27 (55) 33 (96) 35
------ ------ ------
Outstanding at end of year 7,513 $ 26 5,388 $28 3,827 $26
====== ====== ======
Exercisable at end of year 3,760 $ 28 2,715 $27 2,792 $26
====== ====== ======
Weighted-average fair value of options
granted during the year $ 1.36 $ 3.78 $ --
====== ====== ======
Shares available for future grants 6,602 8,735 1,726
====== ====== ======
The exercise price for options exercised during 2000 was approximately $22.
Exercise prices for options outstanding as of December 31, 2000 ranged from
approximately $13 to $35, except for 748,312 options granted in connection with
the 1998 acquisition of EIS discussed in Note 2 for which the range is
approximately $.54 to $18. The weighted-average remaining contractual life of
those options is approximately 5 years.
On February 25, 1999, the Company entered into restricted stock agreements with
two officers which provide for the award of up to 150,000 and 75,000 shares,
respectively, during the period 1999 through 2003 based on the Company achieving
certain increases in net income per common share and stock price levels. Through
December 31, 2000, the two officers have earned 15,000 and 7,500 shares,
respectively. The Company recognizes compensation expense equal to the fair
market value of the stock on the award date over the remaining vesting period
which expires on February 25, 2009.
7. INCOME TAXES
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and amounts used for income tax purposes. Significant components of the
Company's deferred tax assets and liabilities are as follows:
In Thousands 2000 1999
- -------------------------------------------------------------------------------
Deferred tax assets related to:
Expenses not yet deducted for
tax purposes $ 69,271 $ 51,573
Deferred tax liabilities related to:
Employee and retiree benefits 80,989 69,489
Inventory 37,144 41,980
Property and equipment 28,480 26,156
Other 10,179 16,881
- ----------------------------------------------------------------------------
156,792 154,506
Net deferred tax liability 87,521 102,933
Current portion of deferred
tax liability (included in
income taxes payable) 9,707 15,467
- ----------------------------------------------------------------------------
Non-current deferred tax liability $ 77,814 $ 87,466
============================================================================
27
13
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS, CONTINUED
The components of income tax expense are as follows:
In Thousands 2000 1999 1998
- ------------------------------------------------------------------------
Current:
Federal $ 223,452 $200,188 $184,397
State 44,689 37,910 38,547
Deferred (6,714) 12,347 10,379
- ------------------------------------------------------------------------
$ 261,427 $250,445 $233,323
========================================================================
The reasons for the difference between total tax expense and the amount computed
by applying the statutory Federal income tax rate to income before income taxes
are as follows:
In Thousands 2000 1999 1998
- ----------------------------------------------------------------------------------------
Statutory rate applied to
pre-tax income $226,363 $219,824 $206,191
Plus state income taxes, net
of Federal tax benefit 28,322 24,641 25,056
Other 6,742 5,980 2,076
- ----------------------------------------------------------------------------------------
$261,427 $250,445 $233,323
========================================================================================
8. EMPLOYEE BENEFIT PLANS
The Company's noncontributory defined benefit pension plan covers substantially
all of its employees. The benefits are based on an average of the employees'
compensation during five of their last ten years of credited service. The
Company's funding policy is to contribute amounts deductible for income tax
purposes. Contributions are intended to provide not only for benefits attributed
for service to date but also for those expected to be earned in the future.
Pension benefits also include amounts related to a supplemental retirement plan.
Pension Benefits Other Postretirement Benefits
In thousands 2000 1999 2000 1999
- -----------------------------------------------------------------------------------------------------------------------------------
CHANGES IN BENEFIT OBLIGATION
Net benefit obligation at beginning of year $ 574,496 $ 566,868 $ 420 $ 1,427
Service cost 18,859 21,564 88 (118)
Interest cost 41,363 40,332 672 11
Plan participants' contributions -- -- 1,793 2,716
Plan amendments 427 -- 7,134 --
Actuarial (gain) loss (42,865) (35,760) 3,940 (52)
Acquisitions/divestitures -- -- 22 --
Gross benefits paid (19,110) (18,508) (3,532) (3,564)
- -----------------------------------------------------------------------------------------------------------------------------------
Net benefit obligation at end of year $ 573,170 $ 574,496 $ 10,537 $ 420
==================================================================================================================================
CHANGES IN PLAN ASSETS
Fair value of plan assets at beginning of year $ 672,699 $ 647,440 $ -- $ --
Actual return on plan assets 39,189 33,276 -- --
Employer contributions 9,504 10,491 1,739 848
Plan participants' contribution -- -- 1,793 2,716
Gross benefits paid (19,110) (18,508) (3,532) (3,564)
- -----------------------------------------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year $ 702,282 $ 672,699 $ -- $ --
==================================================================================================================================
The following table sets forth the funded status of the plans and the amount
recognized in the balance sheet at December 31.
Pension Benefits Other Postretirement Benefits
In thousands 2000 1999 2000 1999
- -----------------------------------------------------------------------------------------------------------------------------------
Funded status at end of year $ 129,112 $ 98,203 $(10,537) $ (420)
Unrecognized net actuarial loss (gain) 57,582 70,530 1,326 (2,614)
Unrecognized prior service cost (income) (11,328) (14,702) 6,568 --
Unrecognized net transition obligation 260 521 -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net amount recognized at end of year $ 175,626 $ 154,552 $ (2,643) $(3,034)
==================================================================================================================================
28
14
Net periodic pension (income) cost included the following components:
Pension Benefits Other Postretirement Benefits
In thousands 2000 1999 1998 2000 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------------
Service cost $ 18,859 $ 21,564 $ 16,427 $ 88 $(118) $ (76)
Interest cost 41,363 40,332 34,629 672 11 138
Expected return on plan assets (69,154) (64,146) (59,123) -- -- --
Amortization of unrecognized transition obligation 260 260 260 -- -- --
Amortization of prior service (cost) income (2,911) (2,840) (2,865) 588 -- --
Amortization of actuarial loss (gain) 50 499 471 -- (237) (180)
- -----------------------------------------------------------------------------------------------------------------------------------
Net periodic pension (income) cost $(11,533) $ (4,331) $(10,201) $1,348 $(344) $(118)
===================================================================================================================================
The assumptions used in the accounting for the defined benefit plans and
postretirement plan are as follows:
Pension Benefits Other Postretirement Benefits
In thousands 2000 1999 2000 1999
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted-average discount rate 7.63% 7.75% 7.63% 7.75%
Rate of increase in future compensation levels 4.15% 4.15% -- --
Expected long-term rate of return on assets 9.85% 10.00% -- --
Health care cost trend on covered charges -- -- 7.5% 8.00%
The effect of a one percentage point change in the 2000 assumed health care cost
trend is as follows:
In Thousands Decrease Increase
- ---------------------------------------------------------------------------------
Total service and interest cost components
on net periodic postretirement
health care benefit cost $(1,674) $2,563
Accumulated postretirement benefit
obligation for health care benefits (109) 173
At December 31, 2000, the Company-sponsored pension plan held approximately
1,558,819 shares of common stock of the Company with a market value of
approximately $40,822,350. Dividend payments received by the plan on Company
stock totaled approximately $986,000 and $901,000 in 2000 and 1999,
respectively. Fees paid during the year for services rendered by
parties-in-interest were based on customary and reasonable rates for such
services.
The Company has a defined contribution plan which covers substantially all of
its domestic employees. The Company's contributions are determined based on 20%
of the first 6% of the covered employee's salary. Total plan expense was
approximately $4,941,000 in 2000, $4,599,000 in 1999, and $4,491,000 in 1998.
9. SEGMENT DATA
The Company is primarily engaged in the distribution of merchandise, principally
automotive and industrial replacement parts, office supplies, and
electrical/electronic materials throughout the United States, Canada and Mexico.
In the automotive segment, the Company distributes replacement parts (other than
body parts) for substantially all makes and models of automobiles, trucks and
buses. In addition, this segment of the business includes the rebuilding of some
automotive parts and the distribution of replacement parts for certain types of
farm equipment, motorcycles, motorboats and small engines.
The Company's industrial segment distributes a wide variety of industrial
bearings, mechanical and fluid power transmission equipment, including hydraulic
and pneumatic products, material handling components, and related parts and
supplies.
The Company's office products segment distributes a wide variety of office
products, computer supplies, office furniture and business electronics.
The Company's electrical/electronic materials segment distributes a wide variety
of electrical/electronic materials, including insulating and conductive
materials for use in electronic and electrical apparatus.
Intersegment sales are not significant. Operating profit for each industry
segment is calculated as net sales less operating expenses excluding general
corporate expenses, interest expense, equity in income from investees, goodwill
amortization and minority interests. Net property, plant and equipment by
country relate directly to the Company's operations in the respective country.
Corporate assets are principally cash, cash equivalents and headquarters'
facilities and equipment.
In connection with a 2000 management reporting change, certain corporate
expenses were reclassified to the Automotive segment for all years presented.
Additionally, for management purposes, net sales by segment excludes the effect
of certain discounts, incentives and freight billed to customers. The line item
"other" represents the net effect of the discounts, incentives and freight
billed to customers which are reported as a component of net sales in the
Company's consolidated statements of income.
29